India Plans World-Class Banks to Boost Economic Growth

New Delhi: India is gearing up to create larger, world-class banks capable of supporting the capital demands of its fast-growing economy. Finance Minister Nirmala Sitharaman signaled on Thursday that the government is actively engaging with the Reserve Bank of India (RBI) and commercial lenders to shape the next phase of banking reforms.

“India needs a lot of big banks, world-class banks,” Sitharaman said at the 12th State Bank of India Banking and Economics Conclave in Mumbai. She added that discussions on the next steps have already begun.

The government is exploring multiple pathways, including mergers of existing lenders and the creation of new institutions, to build stronger banks capable of financing infrastructure projects and expanding credit access. India has already witnessed major consolidations in the public banking sector over the past decade. In 2017, SBI merged with its associate banks, and in 2019, ten public sector banks were merged into four, reducing the total number of state-run banks from 27 to 12.

Beyond consolidation, Sitharaman emphasized the importance of a supportive banking ecosystem. She highlighted the need for banks to retain the “human touch” in customer service by posting staff who understand local languages and communities. She also urged simplification of loan processes for MSMEs, emphasizing that local knowledge should guide credit decisions instead of excessive reliance on paperwork and outsourced credit ratings.

On the technology front, the finance minister confirmed India’s cautious approach to regulating artificial intelligence (AI), aiming to strike a balance between fostering innovation and safeguarding national security. The government’s ₹1 trillion Research, Development, and Innovation (RDI) fund is also expected to boost private sector innovation, complementing broader banking reforms.

The move to create larger, more capable banks comes amid growing optimism in India’s economic prospects, fueled by recent GST reforms and rising private sector investment. By building financial institutions with global standards, India hopes to sustain its growth momentum and support ambitious infrastructure and credit expansion plans.